creditBound, is a credit building vehicle for youth (18-25 years old) that combines an online platform with in-person credit education. The program utilizes familiar lending circles called tandas, an informal lending club commonly used by Latino communities to build funds and savings. creditBound financial workshops educate and support youth to adopt healthier financial behaviors. Workshops are meant to reduce the possibilities of youth using alternative lending services to fulfill budget gaps and educate youth to avoid common financial pitfalls.
The need to address financial inclusion for vulnerable populations is keenly felt in Watsonville, a rural city of 52,000 people. Watsonville, with an 82% Latino population, faces 50% unbanked and underbanked households, and 65% of households lack the sufficient assets to subsist at the poverty level – double Santa Cruz County’s rates.
A recent study shows that 79% of the Watsonville population has low financial capability skills. As financial behaviors are learnt predominantly from parents, lack healthy financial behaviors will prevent them from equipping their children with the skills and knowledge to avoid financial mistakes.
Additional, 46% of the population in Watsonville has less than a high school degree, with the majority entering the workforce at a young age. As youth enter the workforce with limited financial capability and education, they are vulnerable to fall into common financial pitfalls. Pitfalls such mismanaging credit and using predatory lending services to fulfill budget gaps, lack assets, and overall financial security.
Individuals with low credit or no credit face a barrier to fully participate in the mainstream financial system. Low credit or no credit means youth will have a harder time obtaining quality loans, employment, housing, and accessing other opportunities to build their futures.
creditBound offers youth entering the workforce the opportunity to build credit in a safe and controlled environment, paired with financial education to increase knowledge and access to financial wellbeing.
creditBound brings together a cohort of 6 young adults to create a lending circle to build credit. Each member of the pool will contribute $100 each month during required financial capability workshops. The lending circle will pool $500 every month, each member of the circle will take a turn receiving the lump sum. The online platform will report the monthly payments to a credit agency (Experian). The on-time payments begin to create credit history and improve credit scores.
Our educational workshops provide important information for youth to increase financial knowledge, skills, and access to resources to avoid common financial pitfalls. The financial workshops (1) support and provide tools for youth to achieve financial capability, which gives them the knowledge and competences to navigate their difficult economic realities; (2) create access to assets and capital in order to address significant barriers and banking gaps facing the Watsonville community.
The workshops cover the following topics:
“creditBound helped me gain knowledge about my finances, especially on budgeting, saving, and building good credit. I plan to share what I learned with others to help them improve financially. The most valuable aspect was being able to use the lending circle as a saving account. I happened to receive my money exactly when I needed it for school expenses. I was able to buy books and pay for my classes. The program was like having an emergency fund, that builds credit.”